Small businesses have been losing to group health benefits for a long time now. Unfortunately, until very recently, there weren’t a lot of options for change. We’ve been on the same track for the cost of group health plans since the late 90s.
Individual plans were originally designed for people who did not have access to health benefits through their small business or employer. Of course, many people have been uninsured for a long time. Trying to figure out how to solve that problem has been on the minds of owners, business leaders, politicians, and more for many years.
Since individual plans were originally designed for people who either weren’t working or weren’t offered health benefits through work, most small businesses never really paid attention to them. Until now. We’re seeing more employers than ever leave old traditional group plans and move into managed Individual plans instead.
Let’s have a look at why Individual plans keep beating traditional group health benefits:
1. Better Profit Margins
If we take a look back over the past 3 years, the Kaiser Family Foundation cites that Individual plans have 178-213% better profit margins than Group. As any business owner knows, better profit margins let you expand into new markets, improve your product, and grow your overall business.
More and more healthy people are joining the risk pool for Individual plans. This means lower premiums (which we will look at below) and increased profits, simply because people are not needing their insurance as much.
Research also suggests that when people have personal ownership of their Individual plans (as opposed to an employer owning their Group plan), they will be much more likely to seek less expensive methods of care—such as telehealth, strategizing HSA plans, etc. When people know that they are spending their own money, they become wiser and more conscientious consumers.
2. Better Loss Ratios
In business, it’s not just how much money you make. It’s about how much you don’t lose. If you keep burning cash faster than you are bringing it in, your higher revenues don’t matter at all.
When it comes to Individual plans vs. Group plans, not only do Individual plans have better profit margins, they also aren’t losing as much. A study from the Kaiser Family Foundation cites that Individual plans have 10% better loss ratios than group over the past 3 years.
When you have better profit margins and better loss ratios, you’re looking at better investability and bigger growth as a company.
If you look up some of the top Individual insurance companies in the United States on the New York Stock Exchange, you’ll regularly see 250%+ in growth. This is because investors know that individual plans for small businesses are where the market is heading. This is truly the future of health benefits.
3. Costs Keep Dropping
Do you remember how I mentioned that when you make more and lose less, good things can happen to your product? Well, let’s now take a look at the total costs on premiums over the past 4 years.
What is an insurance premium?
The cost of an insurance product is called the premium, and it’s usually paid monthly to the insurance company to keep the policy coverage effective. This money is pooled together to pay the claims of the other insured people under the same insurance company. Insurance premiums will go up or down depending on the level of coverage selected for the product.
Thanks to the growing Individual market, premium costs keep dropping. Bronze plans, for example, have dropped by 4% in the past 4 years. Gold plans have also gone down, dropping by 8% in the past 4 years.
A drop in premium cost is unheard of in the traditional group space. In fact, costs for family premiums are up at least 55% in the past 10 years—and have never dropped once.
4. Discounts are Increasing
Tax credit discounts—also called “subsidies”—are available for Individual plans. They are never available for traditional group plans. No, this is not why the cost of Individual plans has gone down. This is an added benefit on top of everything else mentioned above.
These tax credit discounts go directly from the IRS to the insurance company. The individual simply buys the plan at a lower cost, and everything else is taken care of on the backend. Generally, people see 30-50% cheaper costs on the same type of plan for Individual compared to Group.
Are you beginning to see how Group can’t even compete with Individual when it comes to bang for your buck?
Not only are these discounts powerful, but they have increased even more after the last stimulus bill that was passed. In fact, the benchmark costs to individuals on average in the United States have been cut by more than 50%. Meaning the costs for individual health plans have been cut in half.
This is why Individual is winning. This is why small businesses need to start making plans to take advantage of this incredible shift in the health benefits market.
Lose the Group Plan—make it “Managed Individual”
The new way of doing health benefits is managed Individual. All of the benefits mentioned above can be unlocked by using Remodel Health’s proprietary WageUp® solution. For the past 6 years, we have been helping small businesses save money and make their benefits better.
Connect with a Consultant for a free demo and a risk-free analysis of all your options to see the impact that you can make on your health benefits. Learn what you can save, the ways you can be smarter with your spending, and how Individual plans are better for your team.
Important Notice: Remodel Health does not intend to provide specific insurance, legal, or tax advice. Remodel Health always recommends consulting with your professional representative to properly evaluate the information presented and its appropriate application to your particular situation.